Testimony 

Before the Subcommittee on Strategic 

Forces, Committee on Armed Services, 

U.S. Senate

United States General Accounting Office 

GAO

For Release on Delivery 

Expected at 2:00 p.m. EST 

Tuesday, November 18, 2003 DEFENSE ACQUISITIONS

Improvements Needed in 

Space Systems Acquisition 

Policy to Optimize Growing 

Investment in Space 

Statement of Robert E. Levin, Director 

Acquisition and Sourcing Management 

GAO-04-253T 
www.gao.gov/cgi-bin/getrpt?GAO-04-253T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Katherine 

Schinasi or Bob Levin at (202) 512-4841 or 

schinasik@gao.gov or levinr@gao.gov. 

Highlights of GAO-04-253T, a report to 

Subcommittee on Strategic Forces, 

Committee on Armed Services, U.S. 

Senate 

November 18, 2003 

DEFENSE ACQUISITIONS 

Improvements Needed in Space Systems 

Acquisition Policy to Optimize Growing 

Investment in Space 

Similar to all weapon system programs, we have found that the problems 

being experienced on space programs are largely rooted in a failure to match 

the customer’s needs with the developer’s resources—technical knowledge, 

timing, and funding—when starting product development. In other words, 

commitments were made to satellite launch dates, cost estimates, and 

delivering certain capabilities without knowing whether technologies being 

pursued could really work as intended. Time and costs were consistently 

underestimated. DOD has recognized this problem and recently revised its 

acquisition policy for non-space systems to ensure that requirements can be 

matched to resources at the time a product development starts. The space 

community, however, in its newly issued policy for space systems, has taken 

another approach. 

As currently written, and from our discussions with DOD officials about how 

it will be implemented, the policy will not result in the most important 

decision, to separate technology development from product development to 

ensure that a match is made between needs and resources. Instead, it 

allows major investment commitments to be made with unknowns about 

technology readiness, requirements, and funding. By not changing its 

current practice, DOD will likely perpetuate problems within individual 

programs that require more time and money to address than anticipated. 

More important, over the long run, the extra investment required to address 

these problems will likely prevent DOD from pursuing more advanced 

capabilities and from making effective tradeoff decisions between space and 

other weapon system programs. 

Overview of Key Decision Points 

The Department of Defense is 

spending nearly $18 billion 

annually to develop, acquire, and 

operate satellites and other spacerelated systems. The majority of 

satellite programs that GAO has 

reviewed over the past 2 decades 

experienced problems that 

increased costs, delayed schedules, 

and increased performance risk. In 

some cases, capabilities have not 

been delivered to the warfighter 

after decades of development. 

DOD has recently implemented a 

new acquisition policy, which sets 

the stage for decision making on 

individual space programs. GAO 

was asked to testify on its 

assessment of the new policy. 

GAO did not make 

recommendations in its testimony. 

However, it reiterated a previous 

recommendation that DOD modify 

its policy to separate technology 

development from product 

development. DOD disagreed with 

our earlier recommendation 

because it believes that the 

modification would slow down 

acquisitions, increase risks, and 

keep DOD from taking advantage 

of cutting edge technology. Our 

past work, however, has 

consistently shown that time and 

risk are reduced and capability is 

increased when programs begin 

with knowledge that technologies 

can work as intended. 
Page 1 GAO-04-253T 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss the Department of Defense’s 

(DOD) new space acquisition policy. This policy will be critical as DOD 

strives to optimize its investment in space—which currently stands at 

more than $18 billion1

 annually, and is expected to grow considerably over 

the next decade. DOD’s space acquisitions have experienced problems 

over the past several decades that have driven up costs by hundreds of 

millions, even billions of dollars, stretched schedules by years, and 

increased performance risks. In some cases, capabilities have not been 

delivered to the war fighter after decades of development. 

Similar to all weapon system programs, we have found that the problems 

being experienced on space programs are largely rooted in a failure to 

match the customer’s needs with the developer’s resources—technical 

knowledge, timing, and funding—when starting product development. 

While DOD’s new policy for space acquisitions may help to illuminate gaps 

between needs and resources, it will not help DOD to close this gap. More 

specifically, the policy allows programs to continue to develop 

technologies after starting product development, which not only means 

that costs and schedule will be more difficult to estimate, but that there 

will be more risk that DOD will encounter technical problems that could 

disrupt design and production and require more time and money to 

address than anticipated. More important, over the long run, the extra 

investment required to address these problems may likely prevent DOD 

from pursuing more advanced technologies and from making effective 

tradeoff decisions between space and other weapon system programs. 

By contrast, DOD is taking steps to better position its other acquisition 

programs for success. Its revised acquisition policy for non-space systems 

separates technology development and product development. 

DOD’s current space network is comprised of constellations of satellites, 

ground-based systems, and associated terminals and receivers. Among 

other things, these assets are used to perform intelligence, surveillance, 

and reconnaissance functions; perform missile warning; provide 

communication services to DOD and other government users; provide 

 1

 This includes research, development and testing; procurement; and operations and 

maintenance accounts. 

The Importance of 

DOD’s Space Systems 

is Growing 
Page 2 GAO-04-253T 

weather and environmental data; and provide positioning and precise 

timing data to U.S. forces as well as national security, civil, and 

commercial users. 

All of these systems are playing an increasingly important role in military 

operations. According to DOD officials, for example, in Operation Iraqi 

Freedom, approximately 70 percent of weapons were precision-guided, 

most of those using Global Positioning System (GPS) capabilities. Weather 

satellites enabled war fighters to not only prepare for, but also take 

advantage of blinding sandstorms. Communication and intelligence 

satellites were also heavily used to plan and carry out attacks and to 

assess post-strike damage. Some of DOD’s satellite systems—such as 

GPS—have also grown into international use for civil and military 

applications and commercial and personal uses. Moreover, the demand for 

space-based capabilities is outpacing DOD’s current capacity. For 

example, even though DOD has augmented its own satellite 

communications capacity with commercial satellites, in each major 

conflict of this past decade, senior military commanders reported 

shortfalls in capacity, particularly for rapid transmission of large data files, 

such as those created by imagery sensors. 

DOD is looking to space to play an even more pivotal role in future 

military operations. As such, it is developing several families of new, 

expensive, and technically challenging satellites, which are expected to 

require dramatically increased investments over the next decade. For 

example, DOD is building new satellites that will use laser optics to 

transport information over long distances in much larger quantities than 

radio waves. The system, known as the Transformational Satellite, or 

TSAT, is to be the cornerstone of DOD’s future communications 

architecture. Many space, air, land, and sea-based systems will depend on 

TSAT to receive and transmit large amounts of data to each other as DOD 

moves toward a more “network centric” war-fighting approach. DOD is 

also building a new space-based radar (SBR) system, which is to employ 

synthetic aperture radar2

 and other advanced technologies to enable DOD 

to have 24-hour coverage over a large portion of the Earth on a continuous 

basis and allow military forces a “deep-look” into denied areas of interest, 

 2

Synthetic Aperture Radar (SAR) “synthesizes” an antenna — a very long antenna — by 

taking radar samples looking sideways along a flight path of an aircraft or satellite, taking 

advantage of the fact that the ground and objects on the ground are essentially stationary 

during the fly-by time. The synthesized radar signals can be used to generate quality 

resolution ground imagery. 
Page 3 GAO-04-253T 

on a non-intrusive basis without risk to personnel or resources. SBR itself 

is expected to generate large amounts of imagery data, and it will rely on 

TSAT to deliver this data to war fighters. 

As figure 1 shows, the costs of these and other new efforts will increase 

DOD’s annual space investment significantly. For example, based on the 

2003 President’s budget, acquisition costs for new satellite programs and 

launch services in the next 4 years are expected to grow by 115 percent—

from $3.5 billion to about $7.5 billion. Costs beyond that period are as yet 

unknown. While DOD’s budget documents show a decrease in 2009 for 

these systems to $6.4 billion—they do not include procurement costs for 

some of the largest programs, including TSAT, GPS III, SBR, Space 

Tracking and Surveillance System (STSS), and Space-Based Surveillance 

System (SBSS), which DOD will begin fielding beginning 2011. Nor do 

these numbers reflect the totality of DOD’s investment in space. For 

example, ground stations and user equipment all require significant 

investment and that investment will likely increase as the new programs 

mature. 
Page 4 GAO-04-253T 

Figure 1: DOD’s Investment in New Programs through 2009 

Table 1 identifies specific programs factored into our analysis of upcoming 

investments. It also shows that DOD will be fielding many of the new 

programs within just a few years of each other. 
Page 5 GAO-04-253T 

Table 1: Satellites and Launch Services Currently Being Developed and Planned 

Program Description Status 

Year DOD plans to 

start launching 

satellites or services

Evolved Expendable Launch 

Vehicle (EELV) 

Acquisition of commercial launch services from two 

competitive families of launch vehicles 

Development 2002

Wideband Gapfiller Satellite 

(WGS) 

Satellites based almost exclusively on commercial 

parts being developed by the Air Force to provide 

interim communications support 

Production 2004

Space Based Infrared 

System (SBIRS)-High 

Ballistic missile detection system being developed 

by the Air Force to replace its legacy detection 

system 

Development 2006 

Advanced Extremely High 

Frequency (AEHF) 

Communications Satellite 

Communications satellite system being developed 

by the Air Force to replace legacy protected 

communications satellites 

Development 2006

Space Tracking and 

Surveillance System (STSS) 

Block 2006 

Two satellites that were developed under the SBIRSLow program that are going to be used as technology 

demonstrators in 2006-2007 missile defense tests to 

assess whether missiles can be effectively tracked 

from space 

Development 2007

National Polar-orbiting 

Operational Environmental 

Satellite System (NPOESS) 

Weather satellites being developed by the National 

Oceanic and Atmospheric Administration, the 

National Aeronautics and Space Administration, and 

DOD to replace those in use by the agencies 

Development 2009

Mobile User Objective 

System (MUOS) 

Navy effort to develop a family of unprotected, 

narrow-band satellites that can support mobile and 

fixed-site users worldwide 

Concept 2009

Space Tracking and 

Surveillance System (STSS) 

Block 2010 

A new constellation of ballistic missile detection and 

tracking satellites being developed by the Missile 

Defense Agency 

Pre Concept 2011

Transformational Satellite 

(TSAT) 

Communications satellites being developed by the 

Air Force to employ advanced technologies in 

support of DOD’s future communications 

architecture 

Concept. Expected 

to enter 

development late 

2003. 

2011

Space Based Surveillance 

System (SBSS) 

A constellation of satellites to be developed that can 

detect, track, and characterize man-made objects in 

space 

Pre Concept 2011

Space Based Radar System 

(SBR) 

Reconnaissance satellites being developed by the 

Air Force to provide 24-hour global coverage 

Concept 2012

Global Positioning System 

(GPS) III 

New version of GPS being developed to add 

advanced jam resistant capabilities and provide 

higher quality and more secure navigational 

capabilities. 

Concept 2012
Page 6 GAO-04-253T 

For the past 6 years, we have been examining ways DOD can get better 

outcomes from its investment in weapon systems, drawing on lessons 

learned from the best, mostly commercial, product development efforts.3

Our work has shown that leading commercial firms expect that their 

managers will deliver high quality products on time and within budgets. 

Doing otherwise could result in losing a customer in the short term and 

losing the company in the long term. Thus, these firms have adopted 

practices that put their individual programs in a good position to succeed 

in meeting these expectations on individual products. Collectively, these 

practices ensure that a high level of knowledge exists about critical facets 

of the product at key junctures and is used to make decisions to deliver 

capability as promised. We have assessed DOD’s space acquisition policy 

as well as its revised acquisition policy for other weapon systems against 

these practices. 

Our reviews have shown that there are three critical junctures at which 

firms must have knowledge to make large investment decisions. First, 

before a product development is started, a match must be made between 

the customers’ needs and the available resources—technical and 

engineering knowledge, time, and funding. Second, a product’s design 

must demonstrate its ability to meet performance requirements and be 

stable about midway through development. Third, the developer must 

show that the product can be manufactured within cost, schedule, and 

quality targets and is demonstrated to be reliable before production 

begins. If the knowledge attained at each juncture does not confirm the 

business case on which the acquisition was originally justified, the 

program does not go forward. These precepts hold for technically 

complex, high volume programs as well as low volume programs such as 

satellites. 

In applying the knowledge-based approach, the most-leveraged investment 

point is the first: matching the customer’s needs with the developer’s 

resources. The timing of this match sets the stage for the eventual 

outcome—desirable or problematic. The match is ultimately achieved in 

every development program, but in successful development programs, it 

 3

 For example, see U.S. General Accounting Office, Best Practices: Better Matching of 

Needs and Resources Will Lead to Better Weapon System Outcomes, GAO-01-288

(Washington, D.C.: March 8, 2001). Best Practices: Better Management of Technology 

Development Can Improve Weapon System Outcomes, GAO/NSIAD-99-162 (Washington, 

D.C.: July 30, 1999). Best Practices: Capturing Design and Manufacturing Knowledge 

Early Improves Acquisition Outcomes, GAO-02-701 (Washington, D.C.: July 15, 2002). 

Grounding Decisions 

in Knowledge is Vital 

for DOD’s Space 

Investment 
Page 7 GAO-04-253T 

occurs before product development begins. When the needs and resources 

match is not made before product development, realistic cost and 

schedule projections become extremely difficult to make. Moreover, 

technical problems can disrupt design and production efforts. Thus, 

leading firms make an important distinction between technology 

development and product development. Technologies that are not ready 

continue to be developed in the technology base—they are not included in 

a product development. 

With technologically achievable requirements and commitment of 

sufficient resources to complete the development, programs are better 

able to deliver products at cost and on schedule. When knowledge lags, 

risks are introduced into the acquisition process that can result in cost 

overruns, schedule delays, and inconsistent product performance. As we 

recently testified,4

 such problems, in turn, can reduce the buying power of 

the defense dollar, delay capabilities for the war fighter, and force 

unplanned—and possibly unnecessary—trade-offs in desired acquisition 

quantities and an adverse ripple effort among other weapon programs or 

defense needs. Moreover, as DOD moves more toward a system-ofsystems approach—where systems are being designed to be highly 

interdependent and interoperable—it is exceedingly important that each 

individual program stay on track. 

Our past work5

 has shown that space programs have not typically achieved 

a match between needs and resources before starting product 

development. Instead, product development was often started based on a 

rigid set of requirements and a hope that technology would develop on a 

schedule. At times, even more requirements were added after the program 

began. When technology did not perform as planned, adding resources in 

terms of time and money became the primary option for solving problems, 

since customer expectations about the products’ performance already 

became hardened. 

 4

 U.S. General Accounting Office. Best Practices: Better Acquisition Outcomes Are 

Possible If DOD Can Apply Lessons from F/A-22 Program, GAO-03-645T (Washington, 

D.C.: April 11, 2003). 

5

 U.S. General Accounting Office. Military Space Operations: Common Problems and 

Their Effects on Satellite and Related Acquisitions, GAO-03-825R (Washington, D.C.: June 

2, 2003). 

Decisions on Space 

Programs Have Not Been 

Sufficiently Grounded in 

Knowledge 
Page 8 GAO-04-253T 

For example, after starting its Advanced Extremely High Frequency 

(AEHF) communications satellite program, DOD substantially and 

frequently changed requirements. In addition, after the launch failure of 

one of DOD’s legacy communications satellites, DOD decided to 

accelerate its plans to build AEHF satellites. The contractors proposed, 

and DOD accepted, a high risk schedule that turned out to be overly 

optimistic and highly compressed, leaving little room for error and 

depending on a precise chain of events taking place at certain times. 

Moreover, at the time DOD decided to accelerate the program, it did not 

have funding needed to support the activities and manpower needed to 

design and build the satellites quicker. The effects of DOD’s inability to 

match needs to resources were significant. Total program cost estimates 

produced by the Air Force reflected an increase from $4.4 billion in 

January 1999 to $5.6 billion in June 2001—a difference of 26 percent. 

Although considered necessary, many changes to requirements were 

substantial, leading to cost increases of hundreds of millions of dollars 

because they required major design modifications. Also, schedule delays 

occurred when some events did not occur on time, and additional delays 

occurred when the program faced funding gaps. Scheduling delays 

eventually culminated into a 2-year delay in the launch of the first satellite. 

We also reported that there were still technical and production risks that 

need to be overcome in the AEHF program, such as a less-than-mature 

satellite antenna system and complications associated with the production 

of the system’s information security system. 

Another example can be found with DOD’s Space-Based Infrared System 

(SBIRS)–High program, which is focused on building high-orbiting 

satellites that can detect ballistic missile launches. Over time, costs have 

more than doubled for this program. Originally, total development costs 

for SBIRS-High were estimated at $1.8 billion. In the fall of 2001, DOD 

identified potential cost growth of $2 billion or more, triggering a 

mandatory review and recertification under 10 U.S.C. section 2433.6

Currently, the Air Force estimates research and development costs for 

SBIRS-High to be $4.4 billion. We reported that when DOD’s SBIRS-High 

 6

 This unit cost reporting mechanism, which also applies to procurement unit cost for 

procurement programs, originated with the Nunn-McCurdy Amendment to the Department 

of Defense Authorization Act, 1982. The amendment, as revised, was made permanent law 

in the following year’s authorization act. Known as Nunn-McCurdy “breaches,” program 

unit cost increases of 15 percent or more trigger a requirement for detailed reporting to 

Congress about the program. Increases of 25 percent or more also trigger the requirement 

for Secretary of Defense certification. 
Page 9 GAO-04-253T 

satellite program began in 1994, none of its critical technologies were 

mature. Moreover, according to a DOD-chartered independent review 

team, the complexity, schedule, and resources needed to develop SBIRSHigh, in hindsight, were misunderstood when the program began. This led 

to an immature understanding of how requirements translated into 

detailed engineering solutions. We recently reported7

 to this subcommittee 

that while the SBIRS restructuring implemented a number of needed 

management changes, the program continues to experience problems and 

risks related to changing requirements, design instability, and software 

development concerns. We concluded that if the Air Force continues to 

add new requirements and program content while prolonging efforts to 

resolve requirements that cannot be met, the program will remain at risk 

of not achieving, within schedule, its intended purposes—to provide an 

early warning and tracking system superior to that of its current ballistic 

missile detection system. 

DOD has also initiated several programs and spent several billion dollars 

over the past 2 decades to develop low-orbiting satellites that can track 

ballistic missiles throughout their flight. However, it has not launched a 

single satellite to perform this capability. We have reported8

 that a primary 

problem affecting these particular programs was that DOD and the Air 

Force did not relax rigid requirements to more closely match technical 

capabilities that were achievable. Program baselines were based on 

artificial time and/or money constraints. Over time, it became apparent 

that the lack of knowledge of program challenges had led to overly 

optimistic schedules and budgets that were funded at less than what was 

needed. Attempts to stay on schedule by approving critical milestones 

without meeting program criteria resulted in higher costs and more slips in 

technology development efforts. For example, our 1997 and 2001 reviews 

of DOD’s $1.7 billion SBIRS-Low program (which was originally a part of 

the SBIRS-High program) showed that the program would enter into the 

product development phase with critical technologies that were immature 

and with optimistic deployment schedules. Some of these technologies 

were so critical that SBIRS-Low would not be able to perform its mission if 

 7

 U.S. General Accounting Office. Defense Acquisitions: Despite Restructuring, SBIRS 

High Program Remains at Risk of Cost and Schedule Overruns, GAO-04-48 (Washington, 

D.C.: October 31, 2003). 

8

 U.S. General Accounting Office, Missile Defense: Alternate Approaches to Space 

Tracking and Surveillance System Need to Be Considered, GAO-03-597 (Washington, D.C.: 

May 23, 2003) and Defense Acquisitions: Space-Based Infrared System-Low At Risk of 

Missing Initial Deployment Date, GAO-01-6 (Washington, D.C.: February 28, 2001). 
Page 10 GAO-04-253T 

they were not available when needed. DOD eventually restructured the 

SBIRS-Low program because of the cost and scheduling problems, and it 

put the equipment it had partially built into storage. In view of the 

program’s mismatch between expectations and what it could achieve, the 

Congress directed DOD to restructure the program (now under the 

responsibility of the Missile Defense Agency) as a research and 

development effort. 

DOD’s new space acquisition policy may help increase insight into gaps 

between needs and resources, but it does not require programs to close 

this gap before starting product development. In other words, the new 

policy does not alter DOD’s practice of committing major investments 

before knowing what resources will be required to deliver promised 

capability. 

There are tools being adopted under the new policy that can enable DOD 

to better predict risks and estimate costs. Similar tools are also being 

adopted by other weapon system programs. For example: 

• DOD is requiring that all space programs conduct technology maturity 

assessments before key oversight decisions to assess the maturity level 

of technology. 

• DOD is requiring space programs to more rigorously assess 

alternatives, consider how their systems will operate in the context of 

larger families of systems, and think through operational, technical, 

and system requirements before programs are started. 

• The new policy seeks to improve the accuracy of cost estimates by 

establishing an independent cost estimating process in partnership 

with DOD’s Cost Analysis Improvement Group (CAIG) and by adopting 

methodologies and tools used by the National Reconnaissance Office. 

To ensure timely cost analyses, the CAIG will augment its own staff 

with cost estimating personnel drawn from across the entire national 

security space cost estimating community. 

Moreover, to facilitate faster decision-making on programs, the policy also 

calls for independent program assessments to be performed on space 

programs nearing key decision points. The teams performing these 

assessments are to be drawn from experts who are not directly affiliated 

with the program, and they are to spend about 8 weeks studying the 

program, particularly the acquisition strategy, contracting information, 

cost analyses, system engineering, and requirements. After this study, the 

team is to conclude its work with recommendations to the Under 

New Space Policy 

Allows Programs to 

Go Forward with Key 

Unknowns 
Page 11 GAO-04-253T 

Secretary of the Air Force, as DOD’s milestone decision authority for all 

DOD major defense acquisition programs for space, on whether or not to 

allow the program to proceed, typically using the traditional “red,” 

“yellow”, and “green” assessment colors to indicate whether the program 

has satisfied key criteria in areas such as requirements setting, cost 

estimates, and risk reduction. 

The benefits that can be derived from tools called for by the space 

acquisition policy, however, will be limited since the policy allows 

programs to continue to develop technologies while they are designing the 

system and undertaking other product development activities. As 

illustrated below, this is a very different and important departure from 

DOD’s acquisition policy for other weapon systems. 
Page 12 GAO-04-253T 

Figure 2: Key Decision Points for DOD’s Acquisition Policies for Weapon Systems and Space Systems 

Note: According to DOD officials, while technology development is expected to ramp down during 

phase B, in some instances technology development could even continue after key decision point C 

or critical design review. Thus, technology development is depicted in a lighter shade after decision 

point C. 

As we reported9 last week, the revised acquisition policy for non-space 

systems establishes mature technologies—that is, technologies 

demonstrated in a relevant environment—as critical before entering 

product development. By encouraging programs to do so, the policy puts 

programs in a better position to deliver capability to the war fighter in a 

timely fashion and within funding estimates because program managers 

can focus on the design, system integration, and manufacturing tasks 

needed to produce a product. By contrast, the space acquisition policy 

 9

 U.S. General Accounting Office. Defense Acquisitions: DOD’s Revised Policy 

Emphasizes Best Practices But More Controls Are Needed, GAO-04-53 (Washington, D.C.: 

November 10, 2003). 
Page 13 GAO-04-253T 

increases the risk that significant problems will be discovered late in 

development because programs are expected to go into development with 

many unknowns about technology. In fact, DOD officials stated that 

technologies may well enter product development at a stage where basic 

components have only been tested in a laboratory, or an even lower level 

of maturity. This means that programs will still be grappling with the 

shapes and sizes of individual components while they are also trying to 

design the overall system and conduct other program activities. In 

essence, DOD will be concurrently building knowledge about technology 

and design—an approach with a problematic history that results in a cycle 

of changes, defects, and delays. Further, the consequences of problems 

experienced during development will be much greater for space programs 

since, under the new space acquisition policy, critical design review 

occurs at the same time as the commitment to build and deliver the first 

product to a customer. It is thus possible that the design review will signify 

a greater commitment on a satellite program at the same time less 

knowledge will be available to make that commitment. 

An upcoming decision by DOD on the new TSAT program represents the 

potential risks posed by the new space acquisition policy. The $12 billion 

program is scheduled to start product development in December 2003, 

meaning that the Air Force will formally commit to this investment and, as 

required by law,10 set goals on cost, schedule and performance. However, 

at present, TSAT’s critical technologies are underdeveloped, leaving the 

Air Force without the knowledge needed to build an effective business 

case for going forward with this massive investment. In fact, most of the 

technologies for TSAT are at a stage where most of the work performed so 

far has been based on analytical studies and a few laboratory tests or, at 

best, some key components have been wired and integrated and have been 

demonstrated to work together in a laboratory environment. The program 

does not know yet whether TSAT’s key technologies can effectively work, 

let alone work together in the harsh space environment for which they are 

intended. Yet the space acquisition policy allows the Air Force to move the 

program forward and to set cost, schedule, and performance goals in the 

face of these unknowns. Moreover, the Air Force has scaled back its AEHF 

program, whose technologies are more mature, to help pay for TSAT’s 

development. Making tradeoff decisions between alternative investments 

is difficult at best. Yet doing so without a solid knowledge basis only 

 10 10 U.S.C. Sections 2220 and 2435. 
Page 14 GAO-04-253T 

compounds the risk of failures. Our work on program after program has 

demonstrated that DOD’s optimism has rarely been justified. 

The growing importance of space systems to military and civil operations 

requires DOD to achieve timely delivery of high quality capability. New 

space systems not only need to support important missions such as missile 

defense and reconnaissance, they need to help DOD move toward a more 

“network centric” warfighting approach. At the same time, given its desire 

to transform how military operations are conducted, DOD must find ways 

to optimize its overall investment on weapon systems since the 

transformation will require DOD to develop new cutting edge systems 

while concurrently maintaining and operating legacy systems—a costly 

proposition. Recognizing the need to optimize its investment, DOD has 

expressed a desire to move toward an “effects-based” investment 

approach, where decisions to acquire new systems are made based on 

needs and joint interests versus annual budgets and parochial interests. 

Changing the new space acquisition policy to clearly separate technology 

development from product development is an essential first step toward 

optimizing DOD’s space investment and assuring more timely delivery of 

capability since it enables a program to align customer expectations with 

resources, and therefore minimize problems that could hurt a program in 

its design and production phase. Thus, we recommended that DOD make 

this change in our recent report on the new space acquisition policy.11

DOD did not agree with our recommendation because it believed that it 

needs to keep up with the fast-paced development of advanced 

technologies for space systems, and that its policy provides the best 

avenue for doing so. In fact, it is DOD’s long-standing and continuous 

inability to bring the benefits of technology to the war fighter in a timely 

manner that underlies our concerns about the policy for space 

acquisitions. In our reviews of numerous DOD programs, including many 

satellite developments, it has been clear that committing to major 

investments in design, engineering, and manufacturing capacity without 

knowing a technology is mature and what resources are needed to ensure 

that the technology can be incorporated into a weapon system has 

consistently resulted in more money, time, and talent spent than either 

 11 U.S. General Accounting Office. Defense Acquisitions: Improvements Needed in Space 

Systems Acquisition Management Policy, GAO-03-1073 (Washington, D.C.: September 15, 

2003). 

Changes Needed to 

Optimize DOD’s 

Investment in Space 
Page 15 GAO-04-253T 

was promised, planned for, or necessary. The impact of such high risk 

decisions has also had a damaging effect on military capability as other 

programs are taxed to meet unplanned cost increases and product units 

are often cut because unit costs increase and funds run out. Moreover, as 

it moves toward a more interdependent environment, DOD can simply no 

longer afford to misestimate the cost and time to field capabilities—such 

as TSAT—since they are needed to support other applications. 

Further, policy changes are just a first step toward optimizing DOD’s 

investment in space and other weapon systems. There are also some 

changes that need to be made at a corporate level to foster a knowledgebased acquisition approach. As we have reported in the past, DOD needs 

to remove incentives that drive premature product development decisions. 

This means embracing a willingness to invest in technology development 

outside a program as well as alleviating pressures to get new acquisition 

programs approved and funded on the basis of requirements that must 

beat out all other alternatives. Other changes—some of which have been 

recognized by recent DOD studies on space acquisitions—include: 

• Keeping key people in place long enough so that they can affect 

decisions and be held accountable. Part of the solution would be to 

shorten product development times. 

• Providing program offices with the capability needed to craft 

acquisition approaches that implement policy and to effectively 

oversee the execution of programs by contractors. 

• Realigning responsibilities and funding between science and 

technology organizations and acquisition organizations to enable the 

separation of technology development from product development. 

• Bringing discipline to the requirements-setting process by demanding a 

match between requirements and resources. 

• Designing and implementing test programs that deliver knowledge 

when needed, including reliability testing early in design. 

Lastly, DOD leadership can use this knowledge-based approach to 

effectively rebalance its investment portfolio. For programs whose original 

justification was based on assumptions of cost, schedule and performance 

that have not been realized, having a consistent set of standards allows 

DOD and the Congress to reevaluate alternatives and make investment 
Page 16 GAO-04-253T 

decisions across programs that increase the likelihood that the war fighter 

will have the best possible mix of capabilities in a timely fashion. 

In conclusion, using an approach for managing weapon system 

investments based on knowledge instead of promises can help DOD fully 

leverage the value of its investment dollars. At a time when the nation is 

facing a large and growing fiscal gap, DOD’s $150 billion annual 

investment in the acquisition of new weapons is the single largest area of 

discretionary spending. While there are differing views on what weapons 

DOD should or should not invest in and how much should be invested, 

there cannot be any disagreement that within this fiscal environment, once 

a consensus has been reached on the level of investment and the specific 

weapons to be acquired, we should get those weapons for what was 

estimated in the budget. While DOD’s revised acquisition policy for nonspace systems puts DOD on a better footing toward this end, DOD’s 

acquisition policy for space systems does not because it allows programs 

to proceed into product development before knowing what their true costs 

will be. Therefore, we continue to recommend that DOD modify its policy 

to separate technology development from product development so that 

needs can be matched with available technology, time, and money at the 

start of a new development program. 

Mr. Chairman and Members of the Subcommittee, this concludes my 

statement. I would be happy to respond to any questions that you or other 

members of the Subcommittee may have. 

In preparing for this testimony, we relied on previously issued GAO 

reports on DOD’s space acquisition policy, common problems affecting 

space acquisitions, SBIRS-High and other individual programs, as well as 

our reports on best practices for weapon systems development. We also 

analyzed DOD’s Future Years Defense Program to assess investment 

trends. In addition, we reviewed DOD reports on satellite acquisition 

problems. We conducted our review between October 29 and November 

14, 2003 in accordance with generally accepted government auditing 

standards. 

Scope and 

Methodology 
Page 17 GAO-04-253T 

Contacts and Acknowledgements 

For future information, please contact Katherine Schinasi or Bob Levin at

(202) 512-4841 or by email at schinasik@gao.gov or levinr@gao.gov

Individuals making key contributions to this testimony include Cristina 

Chaplain, Jean Harker, and Art Gallegos. 

(120308) 
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